Tax sugarcane farmers, not sugary drinks

Mixing morality and taxation typically produces hypocrisy. The Subramanian Committee on the goods and services tax has proposed an ultra-high rate of 40 per cent for sinful goods, against the standard rate of 17-18 per cent. Naturally, the sin list includes tobacco and alcohol products. But a newly discovered sin is sugared aerated drinks.

Coca Cola has protested that if it has to pay such a high tax, it will have to close down several factories and ancillary facilities, costing great many jobs. This is beside the point. If indeed aerated drinks are health hazards, job losses are entirely appropriate. We should not employ people to kill others through disease.

No, the correct objection is that sugar is not dangerous. Tobacco and alcohol are addictive, and consumers get trapped into excessive usage that can damage or kill them. Sugar is not addictive. Drunkards can financially ruin their families. Sweet-toothed teenagers cannot.

Sugar is healthy save in excess, and anything in excess can be dangerous. Placing sugary drinks on par with addictive killers like tobacco and alcohol is silly. The most conservative, sin-conscious Hindu and Muslim families, who hate alcohol and tobacco, will happily guzzle fried and sugary foods. They will find absurd the notion that they are guzzling sin.

Sugar accounts for a fraction of our calorie intake. And sugary drinks account for a tiny fraction of our sugar consumption. We consume infinitely more through mithai (Indian sweets), beverages (like tea, coffee and panna), desserts (like payas or kulfi) and sweetened dishes (Gujarati cuisine excels in this). These are part and parcel of our cultural heritage. No politician or activist dares propose taxing these.

But aerated drinks are produced mainly by foreign companies, and hence are attackable as westernized “junk food”, even though Indian sweets and fried dishes may have far more calories. This is xenophobia parading as morality.
Western youngsters guzzle junk food, including sugared drinks, while doing little or no exercise. This has led to rising obesity, and a health outcry. So, many schools now ban vending machines with aerated drinks. New York tried limiting servings of sugary drinks to 16 ounces each (this was struck down by the courts). To check criticism, cola companies adopted voluntary codes curbing advertisements targeted at youngsters, and the amounts per bottle or can in vending machines.

There is little evidence that this checked obesity. Many high-calorie items other than sugary drinks make people fat. Lack of exercise is a major culprit. Nutritional education is urgently needed. Foods and drinks could carry the warning: “Excessive sugar and salt are injurious to health”. More important is a campaign to encourage physical exercise. Obesity is as much a lifestyle as diet issue. It is not a sin. Sins cannot be rectified by exercise.

Even if sugar was a sin or a health hazard, this would warrant taxing its production at source. But do we tax or impose severe curbs on sugarcane cultivation? No, we subsidize it hugely. The Commission on Agricultural Costs and Prices annually estimates the fair price of cane. But state governments routinely decree far higher “state-advised prices” that mills must pay farmers. These are typically higher than prices abroad. All farmers, including cane farmers, get urea at half the world price.

Worse, states supply power to cane growers at subsidized or zero cost. This unmerited, perverse subsidy encourages over-pumping of tubewells to irrigate sugarcane, a water-guzzling crop. This has extensively damaged or exhausted aquifers in the north-west and interior Maharashtra. Since water stress is rising, this is sinful.

Canal water for cane farmers is generally free or subsidized too. Diverting canal water from cane to other crops would irrigate up to thrice the area, and benefit far more farmers. Yet no state does it.

If indeed sugar is sinful, why subsidize its production? Why not abolish all input subsidies, and instead impose a stiff tax on cane production to check aquifer damage? Alas, this is politically impossible since cane farmers constitute a powerful vote bank. Do NGOs agitating against sugary drinks also agitate for heavily taxing sugarcane? No, they will not get any media headlines or foreign donations for this, and most would rather build a reputation for taking on MNCs. They are as hypocritical as state governments.

Similar hypocrisy has long been evident in the case of tobacco. Growers of tobacco get subsidized water and urea, even as cigarettes are taxed heavily as sinful!

Please let us get our priorities and morality right. Subsidizing an environmentally destructive crop like sugarcane is sinful. Consuming sugar is not. Excessive consumption of anything, including sugar or fats, can be harmful. But blame the excess, not the sugar.

Keep GST simple. Resist the temptation to have 50 tax rates for 50 shades of morality.